Session 4 Flashcards
What are the two (3?) models related to competitive strategy decisions?
- Industrial organization model (internal)
- Resource-based model (external)
+ institution-based model sometimes
What is the βformulaβ for I/o and resource based model?
π = π·πβπΏπ + π·πβπΏπ + π·πβπΏπ + π·πβπΏπ + πΈπΆππππ π½πππ
x1: nb competitors
x2: scope of network
x3: whatever you get the point
What is an industry?
Group of firms producing products that are close substitutes for each other
What are Michael Porterβs five forces?
- Bargaining power of suppliers
- Bargaining power of buyers
- Threat of new entrants
- Rivalry among firms
- Threat of substitutes
What is rivalry among firms
Firm is challenged by a competitors actions or recognizes an opportunity to improve market position
Intensity depends on:
- Number of competitors
- industry growth
- fixed costs
- lack of differentiation
Rivalry is based on:
- Price
- After sale service
- Innovation
What is bargaining power of buyers?
Buyers ability to exert control over price
Buyers are powerful when:
- Few large buyers dominate industry
- Available substitutes
- Buyer is informed
- Products are standardized
- High volume customer
- Sensitive to price
- Low switching costs
- Supplier brand identity is important
What is bargaining power of suppliers?
Suppliers ability to exert control over price
Suppliers powerful when:
- Few large suppliers dominate
- Few substitutes
- Products are important to buyers (e.g. drugs)
- High switching cost
- Buyer is not significant customer
What are the barriers to entry? (threat of new entrants)
- Economies of scale
- Product differentiation
- Capital requirements
- Access to distribution channels
- Cost disadvantages (locations, processes, government subsidies)
- Government policy (government permission/licensing)
What is threat of substitutes?
Products/Services from outside a given industry that perform a similar or same function as the product which the industry produces
Threat when:
- Low switching cost
- substitute price is low
- Same or better performance
Reduce substitution risk:
- Differentiate through quality, after sale service, location
What are the three forces that have been added to Porterβs competitive forces?
- Complementary organizations: Businesses that provide G/S that complement your activities
- Social forces: legal, regulatory, social trends that are affecting business
- New strategies: New approaches to creating and selling G/S that your traditional competitors and emerging competitors are introducing
What are resources?
Tangible and intangible assets a firm uses to implement its strategies.
(assets, people, brand name, etc)
- dont yield a competitive advantage alone
What are capabilities?
Resources firms use to organize and exploit other resources
- created by combining tangible/intangible resources.
- Used to complete tasks
- ## Foundation for building core competencies/competitive advantages
Why is internal analysis important?
Cant evaluate the attractiveness of an industry without analyzing the resources a firm brings to that industry
What are the assumptions of resource-based theory?
Firms have:
- different resources
- unique capabilities depending on how they use resources
- resources/capabilities are not very mobile among firms
- resources/capabilites are the bases of competitive advantage and performance
What are the four categories of tangible resources?
Financial: ability to borrow and generate funds
Organizational: reporting structures
Physical: PPE, distribution, inventory
Technological: avaiable technology, copyrights, patents, trademarks (ACCOUNTING DISAGREES WITH THIS BS)
